Group relief from subsidiary in insolvent liquidation

Group relief from subsidiary in insolvent...

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A Ltd is a full subsidiary of B Ltd.

A is taken into administration and liquidated resulting in capital losses. B wishes to utilise these losses via group relief.

For argument's sake assume HMRC accept that A and B form part of the same CT group and would not seek to deny group relief under CTA2010 s.154.

Assume also that the administrators are willing to joint elect to surrender A's losses.

The problem is in establishing available capital losses. The administrators report on payments and receipts but not on book losses and no statutory accounts are prepared or filed. They have provided figures for trading losses etc. but not for the capital losses which are much more significant.

Are they likely to have this information and if not how would I go about getting it? Would it be possible, or advisable, to bring A out of administration and if so would the administrators be obliged to provide the info necessary to produce statutory accounts and an accurate CT return?

Thanks in advance.

Replies (6)

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By johngroganjga
04th Apr 2014 17:13

Unless I'm missing something you can't group relieve capital losses so your plan is a non-starter.

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By George1234
04th Apr 2014 17:38

Thanks - you're right of course.

But might it be possible to transfer assets out of B to A without any gain/loss, then sell them within A so that the gains can be set off against it's losses?

Needless to say this isn't my specialism and I will be taking professional advice if I can be sure it works in principle.

 

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By johngroganjga
04th Apr 2014 18:06

Too difficult to answer without more information.  I'd go straight to the proper professional advice stage.  Any plan would of course have to have something in for the creditors of A for it to be of any interest to the liquidator.  Are you sure that A (in liquidation) and B are still a group for tax purposes?

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By George1234
04th Apr 2014 18:36

Same group, I think.

B owns more than 75% of A's share capital and is beneficially entitled to any distributable profits so should form part of the same tax group under CTA2010, s.131 and s.152.

So I'm as sure as I can be, but again it's not my specialism.

It's actually a good deal more complicated than I've outlined with several other non-group subsidiaries involved, cross-collateralised debts and so on. But the only noteworthy creditor of A would benefit were group relief available to B and they've implied they will cooperate.

Thanks again for your input. I will suggest to my client they take proper advice on this and make inquiries once I have their instructions.

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By LucasJohnson
05th Apr 2014 01:19

Liquidation or Administration?

Ignoring the terms and phrases you use, a group tax position is preserved in Administration, not in liquidation.

 

Given you started by saying Administration, I will assume it is that and therefore a CT return will be filed with the info you are missing.  Ignore the receipts and payments accounts we have to prepare, simply ask the Administrator for a copy of the CT return and any other supporting info.  If they haven't completed it yet, there might be an opportunity for you to complete it for them.

 

It is only possible to bring A out of admin if creditors are going to be paid in full or there is a rescue plan - e.g.a CVA that could see the company returned to the directors.  A CVA might be very unusual given your 'liquidated' comment, but it is possible, it needs a willing IP and people to think differently.  Feel free to PM if you would like further guidance on this.

 

Your second idea might work, but timing is everything given the effect Administration has on tax periods.

 

As with everything I talk to people about, it is all in the planning, regardless of what insolvency or solvency procedure you want to go through.  Assuming your client is B and controlled A it would have been a lot easier to plan all of this before the directors of A pressed the button.

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By johngroganjga
05th Apr 2014 09:57

OP uses the word "liquidated", so you confirm my suspicion that the group relationship for tax purposes is no more.

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